ETAuto Original: How Renault aims to drive profitability in India over the next two years?

ETAuto Original: How Renault aims to drive profitability in India over the next two years?

Renault India is tasting success with its recent launches and gaining volumes, steadily, as it aims to turn profitable. Moving on from one-product success tag of Duster SUV, it now holds a bouquet of offerings across segments as compacts like Kwid and Triber gaining sizeable chunk in the sub-four metre Indian market. Venkatram Mamillapalle, CEO & MD of the company is steering a clear strategy of one-lakh sales target in India and rejuvenate exports, but can this turn the French carmaker’s books green in India, ETAuto Reports.

The carmaker in 2019 sold 89,000 vehicles in India, while the volume has been increasing with favourable response to Triber, it’s latest offering. Durban: The Indian unit of French carmaker Renault India (RIPL) has set its eyes to turn profitable in the next two years. The carmaker has framed a two-point strategy – cost competitive cars and exports – to win the battle.

“We have been burning cash for the last eight years. It's critical for us to turn India operations cash positive and show it to our headquarters. Our main strategy is to bring highly cost-efficient products to India to achieve this,” Venkatram Mamillapalle, CEO & MD told ETAuto.

Our premium product aspirations have not gone, but currently our focus is on the mass segment vehicles to turn profitable. Once we have cash, we will be in a position to request higher segment products from headquarters.Venkatram Mamillapalle, MD & CEO, Renault India

The company, operating from 372 outlets across India, expects some of its dealers to turn profitable this year itself. On average every outlet sold about 20 vehicles in January, 2020.

Driving this strategy, Renault India aims to increase component exports of Kwid, Triber and upcoming SUV from India to 500 million euros in the next two years from the current 300 million euros achieved in 2019. Brazil and Russian are currently the biggest export market for Renault India. Mamillapalle, who carries about three decades of experience in purchase and supply chain is trying to turn the expertise to its advantage.

While exports of completely built units or CBU is expected to increase to 30,000 units in the next two years from about 13500 units last year.

South Africa is the biggest export market for CBUs, with a total volume of about 10,000 units made-in-India cars shipped last year. The company currently exports Kwid and launched the compact MPV Triber on February 14. Kwid currently contributes 40 per cent of Renault’s total volume to South Africa, a right-hand drive market that gives a natural advantage to Indian manufacturers.

“It's largely an AMT market. We hope to do well with Triber AMT and capture a good market share,” Mamillapalle added.

The South African market declined 7 per cent in 2019. Largely a passenger car market that contributes around 70 per cent of its total five-lakh units-a-year, the rest is taken by pick-ups. The country still follows the BS-IV emission norms.

Source: InstaFinancial, ETAutolytics

Renault is the fourth largest selling brand in South Africa while Toyota leads the pack. South Korean Hyundai Motor is the third largest player with its Indian subsidiary pouring in large imports from India. Nissan Motor and Suzuki Motor are the other Indian automakers that are doing well in South Africa. Japan’s Isuzu also has a substantial market with its pickup range. Even though it is largely a CBU market, Toyota and Isuzu have manufacturing facilities in South Africa.

Renault India’s other market for CBUs has been the SAARC region. Next month Renault India is also planning to launch Triber in Indonesia, which a majority MPV market.

“Exports will not directly add to our revenue as it goes to the global Renault Corp., but it will certainly help us in our profitability by bringing down the per unit production cost with increased volume,” he said.The carmaker in 2019 sold 89,000 vehicles in India, while the volume has been increasing with favourable response to Triber, it’s latest offering. Last month the carmaker contributed almost 3 per cent to India’s total passenger vehicle sales. This year Renault aims to sell about one-lakh vehicles in India aided by a new sub-four metre SUV scheduled for festive -Diwali launch.

The new SUV is expected to be priced aggressively around Rs 4.5 lakh to Rs 5.5 lakh and will be powered by 1L turbocharged engine which was recently showcased at the Auto Expo 2020 in Greater Noida. Renault India targets to produce 1.25 lakh units in 2020, from the 1.04 lakh units of last year. This year it aims to sell one lakh vehicles in the Indian alone. Renault had earlier announced that it will launch one new product every year in the local market.Renault is shifting focus to low-cost vehicles against the changing dynamics of the Indian market that is moving to premium product where customers are keen to pay higher for new-age features like connectivity and cutely designed SUV’s. The Kia Seltos and MG Hector both priced above Rs 10 lakh have been segment leaders since their debut.

“Our premium product aspirations have not gone, but currently our focus is on the mass segment vehicles to turn profitable. Once we have cash, we will be in a position to request higher segment products from headquarters,” Venkatram Mamillapalle said.

Renault has embarked on the entry strategy of premium products like Koleos SUV, Fluence sedan and Pulse hatch for India though many of these failed to evoke good response from the market and were eventually discontinued.